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This week marks a pivotal moment in the third quarter earnings season, with five of the “Magnificent 7” stocks set to report their earnings. These companies include Alphabet Inc., Apple Inc., Microsoft Corp., Meta Platforms, Inc., and Amazon.com, Inc.
Of the remaining two Magnificent 7 stocks, Tesla announced better-than-expected earnings last week. NVIDIA Corp. is expected to report earnings in late November.
Examining Earnings Surprise Records
Attention is focused on the “Mag 5” this week, as they collectively showcase impressive earnings surprise records.
Although none possess perfect five-year records, two of the companies have only missed estimates once during that span. Each company is entering this earnings report with a streak of at least six consecutive beats.
Moreover, analysts show optimism regarding some of these firms, with two estimates for Alphabet being revised higher in the last week.
Analysts take their earnings predictions seriously. They tend to increase estimates only when they believe a company’s quarter will surpass prior expectations.
The big question remains: Will these Magnificent 7 stocks live up to their lofty expectations this week?
Upcoming Earnings Reports for the Mag 5
1. Alphabet Inc. (GOOGL)
Alphabet has achieved 6 consecutive earnings beats. Analysts are feeling optimistic, raising earnings estimates in anticipation of this report.
Year-to-date, Alphabet shares have been underperforming compared to the S&P 500, increasing by 20.1% while the S&P 500 rose by 23%. However, Alphabet is currently the most competitively priced among the Magnificent 7, trading at 21.6 times forward earnings.
Is Alphabet a worthy option for value investors?
2. Apple Inc. (AAPL)
Apple also boasts six consecutive earnings beats, having missed estimates only once in the past five years – a remarkable achievement considering the pandemic’s challenges.
Year-to-date, Apple’s shares have gained 25.8%, slightly above the S&P 500’s 23%. Apple carries a higher premium, with a forward P/E of 31, and it’s projected that earnings will rise by just 8.5% this year.
Can Apple deliver another surprise this quarter?
3. Microsoft Corp. (MSFT)
Microsoft has delivered eight consecutive earnings beats, missing estimates only once in the past five years, in 2022.
Currently, Microsoft shares are up just 15.5% for the year, making it the lowest performer among these five stocks. Like Apple, it also holds a high valuation with a forward P/E of 32.9. Analysts expect earnings to increase by 10.4% in the fiscal first quarter of 2025.
Is this growth sufficient for Microsoft, or does it need to elevate its performance?
4. Meta Platforms, Inc. (META)
Meta Platforms has posted earnings surprises for seven consecutive quarters, with four misses over the last five years.
This year, Meta shares have surged by 66.5%, making it the top performer among the Magnificent 7 stocks reporting this week, reaching new all-time highs.
Meta is also reasonably priced, trading at a forward P/E of 26.7.
Should investors consider purchasing Meta at this point?
5. Amazon.com, Inc. (AMZN)
Amazon has beaten earnings expectations for seven quarters in a row, demonstrating a solid earnings surprise streak despite its historical indifference toward misses or beats.
Year-to-date, Amazon shares have risen by 26.3%, surpassing the S&P 500’s 23%. Earlier this year, Amazon reached new all-time highs, and investors are now looking for another breakout.
Amazon does not come cheap, with a forward P/E of 39.6, but it’s anticipated to see double-digit earnings growth in both this year and the next.
Should Amazon be part of your investment strategy?
[In full disclosure, Tracey holds shares of GOOGL, MSFT, and AMZN in her personal portfolio.]
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The views and opinions expressed herein represent the views of the author and do not necessarily reflect those of Nasdaq, Inc.
